$15-36$ Evaluate Transfer Pricing System: Dual Rates $(LO15-2,3)$

Anstell Corporation operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated $as$ profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components $to$ third parties $in$ addition $to$ Marketing. Selected data from the two operations follow:

Manufacturing Marketing

Capacity $(units)250,000125,000$

Sales price$*$ $ $280$ $ $910$

Variable costs$$ $ $112$ $ $336$

Fixed costs $ $100,000$ $ $720,000$

$*$ For Manufacturing, this $is$ the price $to$ third parties.

$$ For Marketing, this does not include the transfer price paid $to$ Manufacturing.

Required:

$a.$ Current output $in$ Manufacturing $is150,000$ units. Marketing requests $an$ additional $25,000$ units $to$ produce a special order. What transfer price would you recommend?

$b.$ Suppose Manufacturing $is$ operating $at$ full capacity. What transfer price would you recommend?